The State of California has levied penalties that could total $2.6 million against Gunderson Chevrolet of El Monte, Calif., to settle claims that it defrauded more than 1,000 customers between mid-1999 and September 2000.

California authorities say workers at Gunderson, an AutoNation store, switched purchase deals into leases, sold used vehicles as new, forged customers' signatures for additional options and service contracts, and charged more than $2,000 for a $37 anti-theft etching procedure.

Gunderson Chevrolet recorded $120 million in sales last year.

In reaching a settlement with the Department of Motor Vehicles and the Los Angeles District Attorney's office on April 20, Gunderson agreed, with no admission of guilt or liability, that it will:

- Shut down sales operations from April 20-25.

- Pay $1.1 million in fines and costs.

- Create $1 million to $1.5 million fund for consumers allegedly harmed by Gunderson's practices.

- Operate under probation for four years, and be subject to surprise audits for that duration.

According to Jeff McGrath, Los Angeles deputy district attorney, more than 1,000 Gunderson customers were charged for products and services they did not knowingly purchase, or were overcharged for purchased products or services.

An AutoNation spokesman said the parent company takes the allegations seriously and has taken corrective actions, including firing two employees and receiving the resignations of the general manager and finance director at the time of the alleged infractions. AutoNation has owned Gunderson since before the alleged actions were committed.

According to McGrath, a criminal investigation continues into the actions of former Gunderson employees.